Better Cloud Stock: Salesforce vs. ServiceNow

Company Overview - Salesforce is the world's largest provider of cloud-based customer relationship management (CRM) services, while ServiceNow is the market leader in cloud-based digital workflow offerings [1] - Salesforce generated nearly 4 times as much revenue as ServiceNow in its latest fiscal year, but ServiceNow's stock has rallied more than 30% compared to Salesforce's 12% over the past 12 months [1] Salesforce Analysis - Salesforce's revenue increased at a CAGR of 24% from fiscal 2018 to fiscal 2023, driven by acquisitions of Mulesoft, Tableau, and Slack [2] - In fiscal 2024, Salesforce's revenue only rose 11% due to macro headwinds, competition from Microsoft Dynamics, and pressure from activist investors [2] - Analysts expect Salesforce's revenue to climb 9% in fiscal 2025, with adjusted EPS rising 57% in fiscal 2024 and expected to jump 20% in fiscal 2025 [3] - Salesforce's stock is valued at 24 times forward earnings and 6 times this year's sales, but it may not command a higher valuation unless top-line growth accelerates [4] ServiceNow Analysis - ServiceNow's revenue increased at a CAGR of 30% from 2017 to 2022, with 2023 revenue climbing 24% despite macroeconomic headwinds [5] - For 2024, ServiceNow forecasts subscription revenue to increase 21.5% on a constant currency basis, with analysts expecting reported revenue and adjusted EPS to grow 21% and 25%, respectively [5] - ServiceNow's near-term growth is expected to be driven by the federal sector and its Now Assist AI platform, with a projected revenue of at least $15 billion in 2026, representing a CAGR of more than 20% from 2023 [6] - ServiceNow's stock is valued at 52 times forward earnings and 13 times this year's sales, and it launched its first stock buyback plan last year but does not pay a dividend [6] Investment Comparison - ServiceNow is considered the better overall investment due to faster growth, fewer near-term headwinds, a clearer plan for the generative AI market, and a tighter business model without heavy reliance on acquisitions or pressure from activist investors [7]